• You get a W-2 form from an employer who pays payroll taxes. You get a 1099 from someone who paid you, but did not pay taxes on the money you were paid. This means that any income you get on a 1099 must be paid self-employment tax rate.
   
• For most of us the actual difference between 1099 Independent Contractors and W-2 Employees is clear cut for several reasons. But there are many of us out there that have never encountered it or never even thought to discover and understand their differences. Use the links on this page for additional information.
   
• W-2 and 1099 forms must be delivered to employees and independent contractors no later than January 31st. W-2 and 1099 forms must be filed with the IRS by employers and clients no later than March 31st (sooner if not filed electronically). Employers and clients who miss the deadline can face penalties of certain amount.
   
•  Intent of the Parties/Written contracts. In determining the Relationship  between a worker and a company, the IRS considers how the Written contract describes the intent of the parties involved.
   
• Benefits. If a company grants a worker employee benefits, such as Health insurance or paid vacation time, this is evidence of employee status
   
• Termination. Traditionally, the terms on which either party could Terminate the relationship played an   important role determining Whether a worker was an independent contractor or an employee.
   
• Ongoing Relationship. If a business and a worker enter into a Relationship with the understanding that it will be permanent or  Indefinite, this is evidence of an employment relationship.
   
• Regular Business Activity. If a worker performs activities or Services that are "a key aspect of the regular business of the

• The IC has more freedom to negotiate his terms of payment than an employee…. "The IC does not have withholding tax deducted from his pay check...
   
• An employer must also pay certain required benefits, such as workers Compensation insurance...

Advantages of W-2 status:

Working as an employee (contract or permanent, direct) also has Advantages. Taxes are taken out of each paycheck, and the employer
(For a contractor, the agency) pays the employer’s half of the social Security tax... For many people, this will eliminate the need to hire
An accountant or lawyer to prepare the taxes (although for a family There may be other reasons to use a tax professional).

Conclusion:

Independent contractors are not permanent employees of a company. They can work either as 1099 or W2 contractors. Both types of contractors are paid by the client or agency. The earnings of the 1099 Contractor are reported to the IRS on a 1099 form without the withholding of any taxes (federal, state, social security). However, the earnings of a W2 employee is reported to the IRS and federal and state income tax are withheld. The agency also pays the employer's share of the social security tax for W2 employees.

 W2 Contractor:

Under common law, a worker is an employee (contract, permanent, direct) if the person for whom they work has the right to direct and control the way they work, both as to the final result and as to the details of when, where, and how the work is done.

When a person is paid on the form W-2, the employer withholds and pays all of the necessary employee income taxes as required by the IRS. These taxes include: Federal Income Tax, State Income Tax, and FICA (Social Security and Medicare). There are several advantages to working as a W2 employee including the following:

• Work with multiple clients.
• Pays his/her own taxes and files the required government forms.
• Social Security taxes are the sole responsibility of the independent contractor.
• Obtains his/her own benefits including workers’ compensation, disability, etc. The independent contractor is not entitled to any typical employee benefits from any government agency.
• Deducts business expenses from his/her income tax.
  are several advantages to working as an Independent Contractor including: